The Japanese yen could have the investors' interests in the recent sessions as the direct required currency for all risky squared positions in Japan after the Japanese earth quake and its implications could contain the market sentiment and from another side, the Japanese yen has been supported by the usual repatriations in this same time every year as the end of the Japanese fiscal year and also as a direct request for the Japanese yen from inside of Japan as a sack of liquidity and for getting use of the Japanese outside investments to rebuild what have been havocked inside of it but over the medium term it looks to be similar to the earthquake of 1995 impacts and also the USDJPY was near these same rates of exchange as the BOJ has started adopting easing policy for providing liquidity and it was the case since the beginning of this week...

when the back has injected about 183b$ and after that it has added about 98b$ for providing stability to the markets but these 2 tries did not make a even a block in the way of falling of the Japanese stocks especially after yesterday panic because of the radiation increasing in Tokyo because of the wind direction was from Fukushima directly which means that there are increased probabilities of injecting bigger amounts of funds for resorting confidence and stability to the markets which can put weights on the Japanese yen which is not accepted to appreciate further from BOJ while the Japanese exports are struggling the world fear of nuclear radiated products to come out from Japan which can effect negatively on the Japanese exports costs in the coming period before the confidence gets back by stopping the nuclear radiation from these nuclear reactors which supply 30% of the Japanese needs of energy and even in the case of calming down the investors in the Japanese equities markets evaluating this recent action as an over extended action, this can calm down the sharpness of the panic selling asking for the Japanese yen liquidities at any rate too which can support back USDJPY.

The equities markets have been impacted negatively from these sad events in Japan which triggered cutting of Japanese and Asian risky positions especially in US which come accompanied with the end of the fiscal year in Japan as we have just mentioned to trigger strong wave of risk aversion in the markets.

The US equities markets have started this week under the pressure of the Japanese earthquake consequences which have followed the significant drop of the market confidence which resulted from the drop of US preliminary figure of UN. Michigan consumers' sentiment of March to 68.2 from 77.5 in February by the end of last week while the market was expecting getting down to just 76.5 following new downgrading of Spain underpinning the risk aversion sentiment which increased after the rising of US trade deficit to 46.3b$ while the market was waiting for just 41b$ because of the rising of oil prices and also rising of US initial jobless claim to 397k from 371 a weak earlier adding more worries about the stability of the labor markets and so, the Fed's assessment came yesterday referring to a gradual pace of recovery in the labor market and depression in the housing markets with downside risks to face the growth in the case of rising of the commodities and energy prices further over the medium term expecting the underling inflation to be well-contained over the medium term after the Fed's decision of keeping the interest rate unchanged between 0 and .25% and keeping the 600b$ buying bonds plan which has been announced on the third of last November unchanged till the end of next June and this was widely expected and has been published by the Fed's chairman in from of the congress earlier and so there was no major impact on the markets from this week meeting.

The worries about the single currency and its assets backed securities have calmed down after the European countries had approved during the weekend to extend their 250b Euros package for aiding the ailing European countries of debt to 440b Euros while the markets can not rule out a new request from Portugal following Ireland's request last year to have an aid from this offered bailing out plan accompanied with the IMF. The single currency has been under pressure recently by Moody's downgrading of the Greek sovereign debt 3 notches to B1 and Spain's debt to Aa2 triggering further worries about the debt risks evaluation in the Euro area while the markets are preparing for a tightening cycle to be entered by the ECB for containing the prices which should increase the cost of borrowing and covering the bonds auctions in Europe lowering the bonds and stocks prices after they have been underpinned by the adopted easing stance of the ECB after the credit crisis until now and in a reaction against these increased market worries.

 
Kind Regards

FX Market Strategist

Walid Salah El Din

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